The European Union is ramping up efforts to strengthen its defence sector, and a key part of this strategy is improving access to finance. On Wednesday (25 February), Commissioner for Defence and Space Andrius Kubilius hosted a high-level meeting with top financial experts to discuss how to fund Europe’s defence sector. Among the key participants was Robert de Groot, Vice-President of the European Investment Bank (EIB), who shared how the EIB is already playing a crucial role in supporting defence projects.
Commissioner Kubilius stressed that “Europe cannot take peace for granted”. With increasing geopolitical tensions, the EU must ensure it is prepared for any potential military crisis. However, building a strong defence industry requires significant investment. Mr. Kubilius stressed that the financial sector must play a central role in this effort, calling for a “revamped approach” to funding defence projects.
However, one major challenge is the reluctance of many financial institutions to invest in defence. Banks, pension funds, and asset managers often avoid the sector due to concerns over reputational risks and strict sustainability rules. Participants at the meeting agreed that this mindset needs to change. They also highlighted the need for better-defined rules within the EU’s sustainability framework, which currently doesn’t explicitly support defence funding but doesn’t block it.
To attract more investment, participants suggested:
- Long-term contracts: Governments should place joint, long-term orders for defence equipment, giving companies the stability they need to grow.
- Greater transparency: Defence companies should be more open about their operations to build trust with investors.
- Stronger financial markets: Progress on the EU’s Capital Markets Union and Saving and Investment Union could unlock the large sums needed for defence projects.
The EIB’s growing role in Defence
The European Investment Bank, the EU’s key financial institution, is already taking steps to change the landscape. EIB Vice-President Robert de Groot announced that the bank had doubled its support for the defence sector in 2024 and would do so again in 2025. This includes a €1 billion programme for small and medium-sized enterprises (SMEs) in the defence supply chain, marking a significant shift in the EIB’s approach.
What’s next for the EU defence sector?
The discussion at the Roundtable will help shape the upcoming White Paper on the Future of European Defence, which will outline concrete steps to improve access to finance for the sector. The Commission is also working on a simplification package to make investment in defence more attractive.
This meeting was just one step in a broader effort to boost defence funding. In November 2024, the EU organised a Defence Industrial Investment Forum, which brought together over 200 representatives from banks, insurance companies, and investment funds. The goal was to find ways to overcome the financial sector’s reluctance to fund defence projects and to explore innovative solutions for attracting private investment.
